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August 2013

August 21, 2013

It’s been a while since I wrote about how the Israel PTO
deals with the issue of “overlap” between the claims of applications, but that
doesn’t mean the issue has gone away.
It’s still there. In fact, rumor
has it that the higher-ups at the ILPTO will be reconsidering this policy this
year. In light of that, this (admittedly
long) post will address the matter again, presenting the issues involved, why I
think Israel should implement a terminal disclaimer policy similar to that in
the USA, and why I think the legal machinery to implement such a policy is
already in place.

One point of clarification at the outset: this discussion
does not pertain to situations in which there is overlap between the
claims of a later application and the claims of an earlier application (or
patent) which was published before the earliest priority date of the later application. In that situation, under sections 4 and 5 of
the statute, the earlier application is available as prior art against the
later application, and the normal assessments of novelty and non-obviousness
are made.

Rather, the issue of “overlap” arises in situations in which
there are two different patent applications with claims of partly overlapping
scope (e.g. “A table comprising a top and at least three legs” and “A table
having a top and four legs”), and neither application was published before the
earliest priority date to which the claimed subject matter is entitled. The ILPTO long ago adopted the view that in such
cases, the overlapping material must be excised from the later-filed
application, even though the earlier application cannot be cited against the
novelty or inventiveness of the later application. (The “why” of this policy will be explained
shortly.) Within this fact pattern there
are two possible situations: the two applications are co-owned (same
applicant), or they’re not (different applicants). Although the ILPTO ultimately treats both
cases similarly, it uses different legal mechanisms to get there.

Overlapping Claims in Applications Filed by Different
Applicants

In the case of applications filed by two different applicants,
the ILPTO’s practice of requiring the later applicant to excise overlapping
material from its claims is supposedly based on section 9 of the statute:

9. First Comer Wins

If a patent was applied for on one
invention by more than one applicant, the patent shall be granted on the
invention to the one who first applied for the patent in accordance with the
law.

In general, the ILPTO interprets “invention” in this context
to mean anything included within the scope of the claims (but see below re:
selection inventions). Thus, by requiring
the later applicant to amend its claims to eliminate overlap with the claims of
the earlier-filed application, the ILPTO believes it is upholding section
9. From a strict legal construction
standpoint, there is a problem with this interpretation. Section 13(a) of the statute says that “The
specification shall conclude with a claim or claims that define the invention,
provided that each such claim shall arise in a reasonable manner from the
description in the specification”. This would
seem to mean that claims of differing scope define different inventions, even
if those claims overlap, and therefore there is no basis to require limitation
of the scope of the claims of the later filed application. Be that as it may, the rationale for this
policy, evidently, is to avoid the situation in which potential infringers will
have to contend with more than one patent covering the same aspect of an
invention.

Overlapping Claims in Applicant’s Own Applications

Section 9 is limited to situations in which “patent was
applied for on one invention by more than one applicant”. Thus in the case of two applications
belonging to the same applicant, section 9 is irrelevant. Nevertheless, in such situations the ILPTO
will require the applicant to eliminate the overlap between the claims of the
two applications. Again, the rationale
is that if two patents are granted and there is overlap between the claims,
then one of the patents could be assigned to a different entity, leaving
potential infringers with two parties to negotiate with, thus raising the
transaction costs of the negotiations (in the words of Ronald Coase), which is
economically inefficient. The legal
justification for this practice is an alleged violation of section 2 of the
statute:

2. Right to apply for a patent

The owner of a patentable invention
is entitled to apply, in accordance with the dictates of this statute, that a
patent be granted on that invention.

Section 2 says a patent (singular), not patents
(plural), and therefore an applicant may not receive two patents for the same
invention. As with its interpretation of
section 9, in taking a broad view of section 2, the ILPTO ignores section
13(a)’s statement that it is the claims that define the invention. Hence, rather than conclude that claims of
different scope are not claims to the same invention, the ILPTO interprets
“that invention” in section 2 to mean anything falling within the scope of the
claims, so that overlap between the claims of an applicant’s different
applications is precluded. It will be
appreciated that such rejections are sometimes raised with respect to
applications having a parent/divisional relationship, i.e. in which they have
the same disclosure, filing date and priority date.

Selection Inventions

As we have just seen, the rationale behind the ILPTO’s “no
overlap” policy is to reduce transaction costs for parties interested in
licensing patents (or considering mounting challenges to those patents). It will be appreciated that this policy
consideration is waived in the case of so-called “selection inventions”, in
which the later claims are dominated, at least in part, by the earlier claims,
but (a) there is no specific disclosure in the earlier application of
what is claimed in the later application (let alone claims that
specifically claim what is claimed in the later application), (b) the
degree of overlap is small relative to the earlier disclosure, and (c) an
inventive step can be demonstrated for what is claimed in the later application
that overlaps with the earlier claims. Apparently
here the thinking is that since the later-claimed grouping is inventive over
the earlier generic disclosure, the two claimed inventions are not the
same, so section 9 (or section 2, in the case of the same applicant) doesn’t
apply; but why the “sameness” of the invention should be contingent upon
inventive step considerations is unclear. While the selection invention doctrine is
normally applied in the context of published prior art in the obviousness
context, applicants may invoke this doctrine to overcome “overlap” rejections,
whether between their own applications or their application and that of a third
party.

The Present “Overlap” Practice is Inefficient

The concern about an applicant effectively multiplying its
patent pool so that multiple patents cover the same aspect of the same
invention, and the potential for mischief that such multiplication engenders,
is not necessary an illegitimate concern.
Indeed, as will be discussed shortly, US courts long ago recognized this
as a potential problem. But in Israel, having
adopted the view that, in the name of promoting efficiency in hypothetical
negotiations that may or may not take place, “overlap” between co-pending
applications must be eliminated at all costs, the ILPTO has adopted policies
that themselves promote inefficiency of a different kind.

Specifically, examiners spend time looking for and
identifying overlap in applicants’ co-pending applications. Applicants and their patent counsel must then
spend time – in most cases, significant amounts of time – assessing the
veracity of the examiners’ claims, and, where necessary, amending claims to
eliminate the overlap. The examiner who
receives such an amended set of claims must then carefully check to ensure that
the “overlap” has been removed – another time-consuming task, one that inter
alia prevents the examiner from working on other cases. (The problem is compounded in the not uncommon
situation in which an applicant has filed not just two but multiple
applications on closely-related subject matter.)

Alternatively, as noted above, in some cases, applicants may
invoke the selection invention doctrine, but this too necessitates adducing (in
the lab) proof of unexpected superiority, and presenting the results to the
ILPTO.

In addition, the amendment of claims to eliminate “overlap”
may in turn result in a finding of disunity, necessitating the division of an
application as a consequence of the claim amendments. This imposes an additional burden and cost on
the applicant. (The burden is further increased under the ILPTO’s incorrect
no-divisional-of-a-divisional policy, which has been discussed in earlier posts
and hopefully will be revisited in the future.)

US Terminal Disclaimer Policy

As noted above, US courts long ago recognized the problem of
claims of overlapping scope in an applicant’s different patent applications,
and how the grant of several patents having overlapping claims could lead to
“vexatious litigation” if different patents were to be assigned to different
entities. In fact, in the US, the problem
was more acute than it is in Israel: under the pre-1995 US statute, in which
patents had a term of 17 years from the date on which they were granted, but
enjoyed the benefit of the filing date of the earlier application in the
continuation chain, a savvy applicant could theoretically obtain a series of
patents spaced years apart but having overlapping claims. Since the claims weren’t identical, they were
deemed to be directed to different inventions.
Therefore no section 101 rejection (akin to the Israel section 2
rejection described above – applicant is entitled to a single patent,
not multiple patents, on its invention) would arise; and with the
continuation priority in place, the earlier patents in the chain could not be
cited as prior art. Hence an applicant
could in principle extend his patent rights beyond the initial term
by obtaining patents on obvious variations of the same invention, by using
continuation practice to ensure that the patents issued at different times.

What resulted from the courts’ sensitivity to this potential
problem was the judicially created doctrine of “obviousness-type” double
patenting. If the claims of a pending application
are obvious in view of the claims (not the specification or disclosure, but the
claims) of an applicant’s earlier-issued patent (or earlier-filed-but-still-pending
application), then the pending application will not be allowed, on the grounds
that the later claims are an obvious variation of the earlier claims and therefore
in principle could have been included in the earlier patent.

However, this rejection will be waived if the applicant
promises two things: first, that the two patents will always be owned by the
same entity; second, that the term of the later patent will not extend beyond
the term of the earlier patent. In this
way, the possibility of “vexatious litigation” is averted, as is the
possibility of receiving an effective time-wise extension of exclusivity.

This dual promise by the applicant is made in the form of a
document called a “terminal disclaimer”, and its use is so common that the
USPTO even has standard terminal disclaimer forms (here and here) that applicants can
use if they wish. The terminal
disclaimer includes the following wording:

“The owner [of the application in which the terminal
disclaimer is being filed] hereby agrees that any patent so granted on the
instant application shall be enforceable only for and during such period that
it and any patent granted on the [earlier] referenceapplication [or prior
patent, as the case may be] are commonly owned. This agreement runs with
any patent granted on the instant application and is binding upon the grantee,
its successors or assigns.”

The terminal disclaimer is part of the patent’s file
history, and a notice that a terminal disclaimer was filed is published on the
front of the issued patent. And by its
very wording, the terminal disclaimer is binding upon all subsequent owners of
the patent.

Thus the terminal disclaimer addresses the same concerns
that underlie the current ILPTO practice for dealing with overlap between the
claims of an applicant’s own applications. The terminal disclaimer model, however, is a
more efficient way to address those concerns: it spares the applicant the need
to (i) assess the degree of overlap between the claims of co-pending
applications, (ii) devise claims that eliminate the overlap, or (iii) possibly
file divisional applications as a result of the amended claims. And it frees examiners from assessing whether
or not overlap has been eliminated. Moreover,
since both patents will expire simultaneously, it also allows potential
infringers to more easily identify the date on which they may commence
activities that, if performed before that date, would constitute infringement.

Of course, under US practice, an applicant reserves the
right to challenge the propriety of the obviousness-type double patenting
rejection, or to amend its claims to overcome that rejection. But it’s the applicant’s choice – the
applicant isn’t forced to excise the overlap.

The terminal disclaimer effectively allows an applicant to
say, “The claims of these two applications/patents really should be kept
together in a single patent, because the two inventions claimed are not
patentably distinct from one another, and therefore I promise that if the two
patents cease to be commonly owned, the later-issuing patent won’t be
enforceable.” But the legal mechanism by
which the terminal disclaimer operates may be explained in a number of
different ways.

For example, the terminal disclaimer may be conceived of as
a partially conditional dedication of the later patent to the public: if at any
time prior to a certain date (viz. the date on which the first patent will
expire), the ownership of the two patents is split, then the later patent is
dedicated to the public (and is therefore unenforceable). Even if the ownership of the two patents
remains in the same hands, the later patent is dedicated to the public as of
the date on which the earlier patent expires.

Alternatively, the legal mechanism of the terminal
disclaimer maybe thought of as the partially conditional granting of a paid-up,
royalty-free license to anyone who is interested exploiting the patent: if
prior to a certain date, the ownership of the two patents is split, then a
license has been granted to anyone who wishes to practice the later patent. After that date, such a license is granted
even both patents remain owned by the same party.

Other ways to conceive of the mechanism of making the later
patent unenforceable include the partially conditioned grant to the public of a
covenant not to sue; the patentee’s partially conditional forfeiture of the
rights conveyed by the later patent; and the patentee’s acceptance of less than
all the rights to which it would otherwise be entitled (i.e. the patentee explicitly
accepts a patent term in the later patent of less than 20 years from filing if
certain events occur subsequent to the grant of the patent, namely the
splitting of ownership). The latter may
be explained in terms of contract law: a patent is often likened to a contract
between the state and the patent applicant, in which the state agrees to give
the patentee exclusivity for a claimed invention in exchange for adequate
disclosure of a way to make and use the invention. Although the state cannot grant the patentee
more rights (e.g. a longer period of exclusivity) than the law allows, the
patentee can agree to accept less than maximum that the state is allowed to
give. The terminal disclaimer is an
agreement by which the patentee does that.

The terminal disclaimer also states that it is binding on
anyone who steps into the shoes of the applicant, either before or after grant
of the patent. This too can be explained
in a number of ways. Through the lens of contract law, the patentee can be
thought of as agreeing to condition the grant of the patent on the patentee’s
other self-imposed conditions being binding on subsequent owners of the
patent. It can also be viewed as
analogous to an easement or other encumbrance that runs with the land.

If this section has seemed pedantic, it’s been for a good
cause: to show that the terminal disclaimer operates using legal mechanisms and
frameworks that are familiar to American lawyers – and to their Israeli
counterparts. It therefore shouldn’t be
too difficult for Israeli lawyers to get their heads around the terminal
disclaimer idea – and in the next section, I discuss how Israeli law already
contains the legal mechanisms for implementing terminal disclaimer practice.

There is a Mechanism in Israel Law for Introducing Terminal
Disclaimer Practice

Terminal disclaimer practice in the USA utilizes familiar
legal mechanisms, and seeing how the American model works, it doesn’t take a
lot of effort to understand how Israel law likewise has mechanisms that can be put
to similar use. For example, sections
82-88 of the Israel patent statute deal with patent assignments and
licenses. As long as such assignments or
licenses are in writing and recorded with the ILPTO, they are enforceable
against third parties. If, as suggested above,
the terminal disclaimer is conceived of as the granting of a conditional, paid-up,
royalty-free license, then these sections of the statute provide a mechanism
for the implementation of terminal disclaimer practice in Israel: the terminal
disclaimer would be a non-exclusive license (i) granted to everyone (sections
84 and 86), (ii) in writing (section 84), (iii) having effect toward everyone
by virtue of its being recorded (section 87), (iv) with the license’s coming
into force being conditioned (section 86) on the splitting of the ownership of
the particular patent and one or more additional patents listed in the terminal
disclaimer. If the ownership of the
patents is split, the license comes into force and effectively dedicates the
later patent to the public. If the
ownership remains in the same hands, the license has no effect against anyone
until the earlier patent expires.

Alternatively, Israel patent law provides for the
cancellation of a patent by its owner, either actively by informing the
Commissioner that he wishes to cancel the patent, or passively by failing to
timely pay a maintenance fee. A terminal
disclaimer could thus be viewed as a conditional cancellation of the patent,
triggered by the splitting of the ownership or the expiration of the earlier
patent. In a comparable fashion, it could
be deemed to be a conditional gift to the public, in accordance with the Gifts
statute.

Similarly, Israel law provides for imposing conditions on
that are binding upon subsequent owners of property. The Patents statute in particular specifically
provides for patents serving as pledges against obligations, so that ownership
can change hands if the obligation is not fulfilled. The imposition of the conditions of
enforceability upon subsequent owners of the patent can thus be viewed, for
example, as being the emplacement of a limitation on subsequent owners of the
patent, or the pledging of the patent to the benefit of the public, should the
ownership thereof and that of the earlier patent ever split.

Thus the legal tools for implementation of terminal
disclaimer practice in Israel already exist.
That being the case, rather than continuing requiring examiners to look
for “overlap” between applications (instead of examining substantive
patentability issues), and rather than requiring applicants to spend time and
money figuring out ways to eliminate such overlap, the Commissioner should
offer applicants an easy out: file a terminal disclaimer and make the “overlap”
problem between the applicant’s different applications disappear. This being the Hebrew month of Elul, with
Rosh Hashana just around the corner, now would be a good time for the ILPTO to
admit the error of its ways and repent by making terminal disclaimer practice
available to patent applicants in Israel.